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Tip Top Co., a currency dealer decided either to borrow or invest AUD2 million. The following data is available to enable her to perform covered
Tip Top Co., a currency dealer decided either to borrow or invest AUD2 million. The following data is available to enable her to perform covered interest arbitrage (CIA) transactions.
Malaysia interest rate
:
12 percent per annum
Australia interest rate
:
8 percent per annum
Spot rate
:
MYR3.0600/30/AUD
6-month forward rate
:
MYR3.1020/50/AUD
Show the CIA steps and determine the profit (in MYR) that Tip Top Co. may earn.
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